Stocks boosted by jobs data, tech rally

Biggest payrolls gain since '00; Nasdaq lifted by Ericsson

NEW YORK (CBS.MW) -- U.S. stocks closed sharply higher Friday after the government reported strong job growth in January, though market professionals said it wasn't enough to prompt the Federal Reserve to raise interest rates any time soon.

The Nasdaq Composite
$COMPQ
surged 44 points, or 2.2 percent, to 2,064 -- its biggest one-day gain since November -- following a bullish quarterly report from telecom equipment maker Ericsson.

The Dow Jones Industrials Average
DJIA, -0.67%
rose 97 points, or 0.9 percent, at 10,593. The blue-chip barometer ended the week up 1 percent, after falling during the previous two weeks.

Among the day's biggest blue-chip winners were Intel, Caterpillar and financial stocks like Citigroup, American Express and J.P. Morgan Chase.

The S&P 500 Index
SPX, -0.55%
ended up 14 points, or 1.3 percent, to 1,142. Advancing issues pummeled decliners by a 26 to 6 score on the New York Stock Exchange, and by a 23 to 8 margin on the Nasdaq.

Investors cheered news that U.S. nonfarm payrolls grew by 112,000 last month, the strongest monthly expansion since December 2000, but below expectations of growth of 150,000 or more. The nation's unemployment rate fell 5.6 percent from 5.7 percent, vs. expectations of a rise to 5.8 percent, to the lowest level in two years. See full story.

Though the numbers provided fresh confirmation of economic growth, it was weak enough that the Fed "won't have to raise rates as fast or as soon as some people anticipated," said Tom Schrader, head of listed trading at Legg Mason. Listen to audio report.

That also had a significant psychological effect on investors. "It was confidence-boosting in that the recovery will continue but the next uptick might be a little further out," said Jeff Kleintop, chief investment strategist at PNC Advisors. "That's a modest positive and it's why cyclicals have bounced back a bit today."

The data sparked a rally in the bond market, but sent the U.S. dollar reeling.

"Overall, the report offers only a tantalizing glimpse of the future - payrolls are accelerating but not yet very rapidly, though the unemployment rate is dropping steadily," said Ian Shepherdson, chief U.S. economist with High Frequency Economics.

He said he had "hoped for better," and does not expect the report to change the Federal Reserve's stance on monetary policy.

Banking stocks gained strength as January's tame job growth made a rise in interest rates less of a near-term possibility. Rising interest rates tend make it harder for banks to make a profit on borrowing at low short-term rates and lending at higher long-term rates.

Retail banks also get hit as the rate rise feeds into the mortgage market.

McDonald's
MCD, +0.94%
pared gains after reaching a 52-week high in intraday trading on the back of January same-store sales, which rose 13 percent, while total sales surged 19 percent. Shares of the fast food giant finished up 1.6 percent at $27.13.

Shares of Sweden's Ericsson
ERICY
shot up 13 percent after the company reported a much better-than-expected profit in the fourth quarter, raised its demand outlook and said that the mobile infrastructure market had "definitely stabilized." Goldman Sachs followed by upgrading the stock to "outperform" from "in-line."

Bonds surged on the data, sending the yield on the benchmark 10-year Treasury note
TNX, +1.73%
down 0.084 percent to 4.085 percent.

The dollar dropped 1.2 percent vs. the euro to a two-week high of $1.2702, vs. pre-jobs data levels of around $1.2550. Against the yen, the dollar was down 0.3 percent at 105.53, after being up as much as 106.65 before the data.

Also weighing on the buck were expectations that the G-7 finance minister's meeting in South Florida over the weekend would not produce must support for the greenback. See full story.

Within commodities, April gold futures surged $5.40 to $404.20, with the falling dollar providing a big boost. March crude futures eased 50 cents to $32.58 per barrel, with most energy traders betting that OPEC will vote against an output quota cut.

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